For many Australians, having too much saved in their superannuation funds is rarely a worry. However, whether you’ve managed to build up a more-than-healthy nest egg or end up passing away earlier than you imagined, it can happen that, upon leaving this mortal coil, your super savings continue to live on.
What happens to this wayward money, and who receives it?
Your super and your trustee
When you die, your super immediately goes into the hands of your trustee — the individual appointed to manage your fund for you. They are then tasked with paying this money out to your dependents. This can include:
Your children or grandchildren
Your spouse, including same-sex partners
Anyone who is financially dependent on you
This sum is not just your superannuation, but also includes the death benefit — a payout from any life insurance policy you might have had. This total amount can be paid as a lump sum, a pension or even a combination of both.
Some people might think that their superannuation is simply dealt with as part of their estate, and will be divvied out according to their will. Instead, this will only happen if you don’t have any dependents to which the trustee can pay the money out to.
If you do have dependents, under the superannuation rules the trustee has the power to distribute your funds according to what she or he believes is fair. That’s why, If you have particular wishes for how your super savings should be used, it’s important to leave behind specific legal instructions for the trustee.
Nominations can be both binding and non-binding. A non-binding nomination gives the trustee guidelines for paying out your savings, but does not require her or him to follow it. The trustee still has discretion.
A binding nomination, by contrast, lets you dictate exactly how you want your super to be paid out, in what proportion and to whom. You can even nominate it to be paid to your estate, where it will be dealt with according to your will.
What to know about binding nominations
If having a binding nomination in place sounds like a great idea, there are a number of things to keep in mind. For one, binding nominations only have a life span of three years, so you need to update them when they expire.
In addition to this, much like a will, binding nominations have to be kept up to date and managed. Family situations change, whether due to divorce, a death in the family, estrangement or many other reasons. That’s why it’s important to review your binding nominations regularly — otherwise you might find hard-earned super savings going to the wrong person!